“These allegations, if true, may help explain the numerous and increasingly troubling reports in recent years of rapid and unexplained price increases for generic drugs,” Warren wrote in the letter.

The Pharmaceutical Research and Manufacturers of America (PhRMA) has argued that generic drug shortages and high generic prices often reflect a variety of factors beyond the manufacturers' control, such as the high cost of ingredients, high compliance costs, manufacturing problems, and the effects of health insurers' and pharmacy benefits managers' negotiating and pricing strategies.

The bill

The draft bill would create a new Office of Drug Manufacturing at HHS.

The office could produce a generic drug itself if no supplier was selling the drug in the United States; fewer than three companies were selling the drug in the United States, and the price of the drug had spiked; or fewer than three companies were selling the drug in the United States, the drug was classified as “essential” by the World Health Organization, and the price of drug was high.

If the office made a drug, it would have to set what the bill classifies as a “fair price.” The “fair price” would be based partly on manufacturing or procurement costs, on the impact of the drug price on patient access to the drug, and the impact of the drug price on government health programs, such as Medicare and Medicaid.

The “fair price” calculations would also include the administrative costs of operating the Office of Drug Manufacturing.

The bill singles out insulin for special treatment. The new HHS office would have to begin making insulin within one year after the bill was enacted.

Government-controlled pharmaceutical production

The federal government already plays a role in sponsoring the production of some vaccines, through the Biomedical Advanced Research and Development Authority (BARDA). BARDA, for example, has commissioned a manufacturers to supply anthrax vaccine.

Some private U.S. organizations have been trying to organize nonprofit generic makers in response to skyrocketing prices for drugs such as insulin, and shortages of medical products such as saline solution bags.

A third of U.S. hospitals teamed up in September to form Civica Rx, a nonprofit generic drug company based in Salt Lake City. The list of Civica Rx backers includes Catholic Health Initiatives, HCA Healthcare, Intermountain Healthcare and Mayo Clinic.

Governments in some other countries have large pharmaceutical manufacturing operations.

The list of countries with state-owned pharmaceutical companies includes Brazil, India, Indonesia, Malaysia and Thailand.

Resources

Links to the text of the Warren-Schakowsky bill, a summary, and other, related documents are available here.